The past week has been all about reflecting on venture data from Q4 2010, but we also spotted some new financings, partnership deals, and acquisitions for New England’s tech and life sciences firms.

—Well, we did write about the top 10 venture deals in the Boston area from last quarter, based on data the MoneyTree Report provided. A $27.8 million financing for Cambridge, MA-based optical device developer NinePoint Medical, and $26 million for Lexington, MA-based 1366 Technologies, a maker of silicon wafer technology out to lessen the cost of solar energy, were among the top deals.

—ArQule (NASDAQ: ARQL), a Woburn, MA-based cancer drug developer, said it priced a 7-million-share public offering of its common stock at $6.15 per share. The deal is expected to bring in net proceeds of $40.5 million for ArQule.

—Xtalic, a Marlborough, MA-based maker of nanostructured alloy coatings for electronics components, nabbed $8 million in equity-based funding, an SEC filing showed. The firm’s previous investors include Matrix Partners and North Bridge Venture Partners

—Quincy, MA-based Myriant Technologies said it brought in $60 million in equity financing from Thailand’s PTT Chemical Public Company. The company is planning to build a plant in Louisiana for producing bio-based succinic acid.

—French drug giant Sanofi-Aventis (NYSE: SNY) extended its $69-per-share or $18.5 million tender offer of Cambridge biotech Genzyme (NASDAQ: GENZ) until just before midnight on February 15. The previous offer deadline expired last Friday.

—Woburn-based BioVex was bought by drug company Amgen (NASDAQ: AMGN) for $425 million upfront, with another $575 million to come in development and sales milestones payments. Thousand Oaks, CA-based Amgen said the purchase of BioVex, which is engineering viruses to kill cancer cells while sparing healthy tissues, is expected to close before the end of March.

—Massachusetts startups collected $192.3 million in 29 equity-based deals in December, according to CB Insights FundingFlash. It was a jump from the November startup funding total, but investments in healthcare companies fell by more than $26 million in December.

—RainDance Technologies of Lexington, MA, said it wrapped up a $37.5 million Series D funding round, which was co-led by new investor Quaker BioVentures and existing investor Mohr Davidow Ventures. Previous investors Alloy Ventures and Acadia Woods also participated in the deal for RainDance, which develops genomic research tools.

—Celtra, a Cambridge-based mobile advertising and analytics startup, announced it had brought in $5 million in Series A money from GrandBanks Capital and Fairhaven Capital.

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Woburn, MA-based ArQule (NASDAQ:ARQL), a developer of cancer drugs, said yesterday that it priced a public offering of 7 million shares of common stock at $6.15 per share, expecting to bring in net proceeds of $40.5 million from the stock sale. The company gave underwriters of the offering the option to buy up to 1.05 million more shares to cover over-allotments. The offering is expected to close on January 25.

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Lycera has taken an important early step in its journey of developing new treatments for autoimmune diseases. The startup, with operations in Plymouth, MI, and Cambridge, MA, has nailed down an $11 million cash infusion, which represents the second installment of a three-part, $36 million financing originally announced a year ago.

The company secured the new money from Clarus Ventures, InterWest Partners, and Arch Venture Partners, about 12 months after that crew provided $10 million and some ambitious goals to hit if the company wanted any more. Clarus’s Jeff Leiden, the former president of Abbott Laboratories, is taking on the additional role of chairman at Lycera, and the company said it has hired Robin Goldstein, a veteran of ArQule and Novartis, as part of its push through the next critical phase of preclinical testing.

Lycera, which we profiled back in January, was founded in 2006 based on research from Gary Glick‘s lab at the University of Michigan. The vision is to treat autoimmune diseases, in which the immune system goes awry and attacks healthy tissue like a virus, in a new way. Rheumatoid arthritis, just one of many autoimmune conditions, already makes up an estimated $13 billion worldwide annual market for companies like Amgen, Johnson & Johnson, and Abbott. While those companies’ treatments have been a godsend for many patients, they are injectable, and they disable part of the immune system, leaving patients vulnerable to infections. Lycera hopes to improve upon this standard with oral pills that are more convenient, and by hitting novel targets on cells that can tamp down the autoimmune activity without weakening people’s natural defenses.

Over the past year, Lycera’s small team of about 15 people have shown they can create orally-delivered small-molecule compounds that were shown to be safe and effective in animal experiments involving rodents, dogs, and other species, Glick says. The company is now gearing up to do the experiments it will need to get the green light from the FDA to start clinical trials, which it expects to begin in 2011.

Gary Glick

“These weren’t softball milestones,” Glick says. “These were significant scientific achievements. Our people worked extremely hard and really know what they are doing.”

Most of the “action” at Lycera is happening at the company’s laboratories in Plymouth, MI, near Glick’s lab at the University of Michigan, according to CEO Bill Sibold. The company has a drug discovery team there, many of whom used to work together at Pfizer before the company closed its research center there. But the company is setting up key business functions, like clinical development, regulatory affairs, business development, and executive leadership in Cambridge, to take advantage of the Boston region’s deep biotech talent pool, Sibold said when he joined the company in January.

Managing a small company in Michigan and Massachusetts hasn’t been a problem, Sibold says. It’s about a 90-minute flight, and Lycera’s office is 20 minutes from the Detroit airport. Between multiple phone calls a day, and e-mail, “we stay in touch,” Sibold says.

Lycera’s lead drug candidate is designed … Next Page »

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New England has a deep pond with many of the very biggest fish in the global life sciences industry, but it also has its share of minnows, and they are getting eaten alive in the downturn.

That finding leaped out at me after I scoured through financial data on 85 publicly traded life sciences companies in greater Boston, Seattle, and San Diego as part of our regular Biotech Survival Index feature. The final numbers aren’t pretty for Boston. Just 15 of the 46 public life sciences companies we follow in Massachusetts had more cash on their balance sheet at the end of June 2009 than they did on New Year’s Day, based on a review of the most recent round of quarterly financial filings with the Securities and Exchange Commission. (Companies were included if they were listed on the NASDAQ or NYSE, and had market capitalization of at least $100 million).

Even though jobs have been cut, drug candidates have been shelved, and some last-ditch partnerships have been struck, all that frenzied activity didn’t really add up to a strengthened financial future for a majority of the region’s money-losing companies. The cash crunch has prompted a couple of Massachusetts companies to fold this year (Altus Pharmaceuticals and Epix Pharmaceuticals), a couple more to sell out for a pittance (Targanta Therapeutics and NitroMed), and one company that actually improved its financial position to move to Wisconsin (Exact Sciences).

While those companies were vanishing, there was some good news to be found in the filings. Some of Boston’s anchor tenants took advantage of their financial strength to beef up their cash balances, pay down debt, or otherwise tidy up financial matters. Essentially, the rich (Biogen Idec, Genzyme, Thermo Fisher Scientific, and Millipore, to name a few) got richer.

But what really shocked me the most was how poorly Boston’s life sciences companies have coped with the downturn compared with peers in the two other cities where Xconomy follows life sciences—Seattle and San Diego. Granted, neither of those cities has anywhere near the number of profitable life sciences companies that Boston does (18). And many of the little biotechs in those cities were backed into a corner in the first half of 2009, and either had to do or die—and things don’t appear quite that dire yet at many companies in Boston. But a majority of companies in Seattle (7 of 12) actually strengthened their balance sheets during the first half of the year. The same pattern emerged in San Diego, where 15 of the 27 companies built up their cash reserves in the same period.

If you combine those two hubs into a West Coast cluster that has a sample size similar to Boston’s (39 companies versus 46), the Bay State doesn’t look so resilient in comparison. About 56 percent of companies on the West Coast (22 of 39) strengthened their financial position in the first half of the year, while just 33 percent of the companies in Boston (15 of 46) did that well.

Read on for a complete rundown of the financial position for all 46 Massachusetts companies, listed in alphabetical order. To purchase a much expanded version of this report, in PDF format, click the “Add to Cart” button below. The expanded version, available for $95,* includes an assessment of each company’s financial position at the end of June compared to six months earlier, the projected length of time it can survive on its existing cash reserves, and an analysis of the strategic moves it has made to stay afloat in the current environment. Click here to see a sample entry. *Price is subject to change without notice.

We intend to repeat this analysis regularly to monitor the financial health of the life sciences companies we follow in San Diego, Seattle, and Boston. Please send feedback to editors@xconomy.com.

Abiomed (NASDAQ: ABMD)
Cash on hand: $54.5 million
Related Xconomy coverage:
“Abiomed Wins FDA Approval of Heart Pump”

Alkermes (NASDAQ: ALKS)
Cash on hand: $380.4 million
Related Xconomy coverage:
“Alkermes Knocks on Door of Biotech Big Leagues, Aims to Make Drugs of its Own”
“Alkermes, Swinging for the Fence, Touts New Anti-Addiction Drug”
“Alkermes’ Ambitious Builder, Richard Pops, Grabs Reins to Re-Ignite Growth Phase”

Alnylam Pharmaceuticals (NASDAQ: ALNY)
Cash on hand: $473.8 million
Related Xconomy coverage:
“Alnylam Takes Time to Mull Over RSV Game Plan”
“Alnylam, With Tekmira and New Northwest Firm Alcana, Look to Push Borders of RNAi Delivery”
“Alnylam Pushes First RNAi Drug That Circulates Through Body Into Human Test”
“Alnylam’s In the Money, Expects $500 Million in Bank At Year End”
“Alnylam Looks to Spinoffs to Unleash RNAi Technologies for Stem Cells, Vaccines“ … Next Page »

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When I last crunched the numbers on the financial health of the Boston area’s public life sciences companies, back in November, I noted that 15 of them had more than $100 million stockpiled. These firms, I reasoned, were likely in a decent position to weather the economic storm. Now with quarterly financial reporting through December now in the books for most of the firms in the sector, I came to a surprising conclusion. There are now even more companies, 19, in that position of relative financial strength. Infinity Pharmaceuticals, Momenta Pharmaceuticals, Hologic, and Bruker are all newcomers to the $100 million club as of December 31.

Then again, in my review of the new numbers I also spotted 16 companies that likely had less than $50 million in the bank at year’s end (I say “likely” because three haven’t reported their numbers). That sign of thin reserves suggests those companies will face tough choices ahead.

Here’s the full rundown, in alphabetical order, of the 44 Boston-area life sciences companies for which I tracked down end-of-year financial figures.

—Abiomed (NASDAQ: ABMD). The Danvers, MA-based medical device company had $63.8 million in cash and investments at the end of December, and a $7.7 million net loss in the quarter. That’s more cash than it had socked away at the end of September—$50.6 million.

—Acusphere (OTCBB: ACUS). This biotech company has cut about two-thirds of its workforce, or 40 jobs, and consolidated all its facilities in a manufacturing plant in Tewksbury, MA. It has avoided making a formal financial report to the SEC, although it says the cuts will help it stretch its cash into the third quarter of 2009, which it hopes will buy enough time to come up with “financing alternatives.” The stock is down to 3 cents. Acusphere is a newcomer to the list, which I overlooked last time.

—Alkermes (NASDAQ: ALKS). This Cambridge, MA-based company has maneuvered itself into position of financial strength, with $423 million in cash and investments at the end of the year, and with a $112.3 million profit in the quarter. As I mentioned last month, Alkermes has potential for revenue growth this year if Eli Lilly and Amylin Pharmaceuticals win FDA approval for once-weekly exenatide for diabetes, which is based partly on a technology license from the Massachusetts firm.

—Alnylam Pharmaceuticals (NASDAQ: ALNY). This Cambridge, MA-based biotech company doesn’t have to worry about cash, with $512.7 million at the end of 2008, and a relatively skinny net loss in the quarter of $9.4 million. It expects to burn through no more than $77 million of its cash this year, ending 2009 with more than $435 million. Indeed, rather than fretting over finances, CEO John Maraganore is thinking about how to prioritize opportunities, as he told me last month.

—Altus Pharmaceuticals (NASDAQ: ALTU). Alarm bells must be going off at Waltham, MA-based Altus. This company used almost $90 million of its cash reserves in 2008, and closed the year with $48.6 million left in the bank. Even after cutting 107 jobs, or three-fourths of its workforce, Altus still expects to spend $50 million to $60 million for operations this year. It says it has enough cash to run “into the fourth quarter” and that it will try to raise more capital in the next three to six months. … Next Page »

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Forma Therapeutics, a startup company co-founded by scientists at the Broad Institute of Harvard and MIT, has raised $25 million to create drugs that build on research that has yielded clues about the root genetic causes of what makes a cell turn cancerous.

Forma, based in Cambridge, MA, was formed 2007 to generate drug compounds that hit recently discovered cancer targets. Backed by sources including the Novartis Option Fund in Cambridge and Bio*One Capital of Singapore, Forma plans to unveil today its strategy for discovering new cancer treatments and its team of founders, which includes three stars from the Broad—Todd Golub, Stuart Schreiber, and Michael Foley.

The company intends to build on years of a $100 million federally-funded initiative at the Broad Institute, and other research centers around the country, called the Cancer Genome Atlas, to identify critical genes that can go awry and play a role in causing cancer.

“Forma recognizes the opportunity that lies in the discoveries of The Cancer Genome [Atlas] project, and we assemble the tools to go after the more difficult targets,” says Steven Tregay, CEO and co-founder of Forma.

Tregay, who had served as acting CEO of Forma, left his post as a managing director at the Novartis Option Fund in Cambridge in fall 2008 to become the full-time chief executive of the startup. Novartis Option Fund, formed by Swiss drug giant Novartis in 2007 (and which I profiled last year), is a lead investor in Forma along with Bio*One Capital, an investment arm of the Singaporean government.

Forma, which has operated under the radar until today, is using a combination of drug-discovery technologies to develop a pipeline of anti-cancer drugs. In September, Forma acquired … Next Page »

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There was quite a bit of news this week relating to RNA-interference drugs, and to FDA approval (or non-approval, as the case may be) of drugs under development by local biotechs. Without further ado:

—It was sports week for Ryan. First, he interviewed biotech hedge fund founder Rich Aldrich, part of the group that owns the Boston Celtics, who said why he’s excited about Alnylam, Alnara, and the future of his fund. Then he talked with David Lucchino, CEO of Cambridge, MA-based Semprus Biosciences and nephew of Red Sox CEO Larry Lucchino, about Semprus’s $8 million Series A round and its plans to develop longer-lasting polymer-based surface materials for plastic and metal medical implants.

—Yet another new pharmaceutical company focusing on RNA-interference, Norwood, MA-based AiRNA, emerged from stealth mode, with a focus on so-called asymmetrical interfering RNA molecules 15 base pairs in length, which are shorter (and may therefore have fewer side effects) than the RNAi molecules being developed by Alnylam and others. Alnylam, meanwhile, announced it has filed an application with the FDA to start the first clinical trials of its systemic RNAi anti-cancer drug, ALN-VSP.

—In Waltham, MA, Entra Pharmaceuticals collected the first $4.2 million of what could end up being a $12.5 million Series A venture round, with Flybridge Capital Partners and North Bridge Venture Partners participating.

—BioTrove of Woburn, MA, changed its mind about going public in the current market, canceling the planned $75 million IPO for which it first filed eight months ago.

—Weeks after news that the FDA had declined to approve its lead drug candidate, an antibiotic intended to treat the MRSA infection, Cambridge, MA-based Targanta Therapeutics laid off 86 employees, about three-quarters of its staff.

—In a private offering of its stock, genetic analysis tools maker Helicos Biosciences … Next Page »

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Peter Pallai has an unusual take on outsourcing. In his view, it might be the way to bring some stability to the volatile world of biotechnology.

Pallai, a Hungarian-born medicinal chemist, is carrying out this vision through a contract-chemistry shop in San Diego called BioBlocks. Pallai started this outfit in 2002 after spending more than 20 years at drug companies, including Woburn, MA-based ArQule (NASDAQ: ARQL). In those jobs, he saw firsthand that after a biological discovery is made, say, of a promising new target for cancer, then the long, hard slog begins. Chemists need to work to “optimize” a drug that hits the target precisely, and tightly, without causing harmful side effects—a process that can take years and millions of dollars.

Approximately one out of 5,000 compounds pass an initial screen, hit the designated biological target, and end up making it to clinical trials. So Pallai’s pitch is simple. He and his team are good at one thing-chemical synthesis of new drug candidates to hit those targets. By outsourcing this piece of the puzzle to his team of chemists, about 25 of whom work in Budapest, Hungary, biotech companies can get the work done fast and well, he says. It makes sense professionally for his chemists as well, because they can get steady work, rather than hitch their wagons to one of hundreds of biotechs that dream of becoming the next Genentech, but are more likely to end up flaming out in a few years.

“This is a treacherous path to travel,” Pallai said when I visited his office a few weeks ago. “Companies have to ask themselves if these are things they really know well how to do. We can make them more efficient, and spend their intellectual effort on other things.”

BioBlocks claims it can shorten the process from a biological “hit” to the identification of a “lead” drug candidate to inhibit it. Running through the databases, the patent literature, finding the right reagents and ingredients is the chemists’ forte, he says. It’s a critical skill that biotech companies often lack.

So why do this work in Hungary? First, Pallai has connections there and speaks the language. But second, he says Hungary has an ample supply of talented chemists with experience at companies like Sanofi-Aventis. And, of course, the wages … Next Page »

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ArQule, a Woburn, MA-based cancer drug developer, said today it will receive a $60 million payment through a partnership with Tokyo-based Daiichi Sankyo. The companies will co-develop ARQ-197, a drug designed to block a target on cancer cells called c-Met. Separately, ArQule (NASDAQ: ARQL) said Swiss pharma giant Roche declined an option to develop another drug, called ARQ-761.

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I was initially skeptical when I first heard about biotech startup AiRNA Pharmaceuticals and its new approach to RNA-interference (RNAi already gets lots of attention for its ability to silence genes for cancer and many other diseases). The Norwood, MA, firm claimed in a press release that its next-generation RNA-interference (RNAi) technology is “superior” to other RNA-blocking methods. That would include the gold-standard approach, small interfering RNA, used by a heavyweight in the field, Alnylam Pharmaceuticals (NASDAQ:ALNY), among others.

So my internal hype alarm rang when I saw AiRNA’s claim to superiority. But then I talked to the inventor, Chiang Li, chief executive of Norwood-based biotech firm Boston Biomedical. He convinced me that AiRNA, which is a spin-off of Boston Biomedical, could be on to something big.

AiRNA is developing so-called asymmetrical interfering RNA (aiRNA)—made public in the December issue of Nature Biotechnology—which uses a molecule of 15 base pairs in length. This structure is different than small interfering RNA (siRNA) molecules, which are 19-21 base pairs long. Cambridge, MA-based Alnylam, for one, has built a company with a market cap approaching $1 billion around siRNA technology.

“[Asymmetrical interfering RNA] is essentially the next generation of the technology that can silence genes but with improved gene-silencing properties,” Li says. “It’s the same as siRNA, in that it can theoretically target almost any disease gene.”

How does AiRNA’s approach stack up against Alnylam’s well-known technology? The inventors of aiRNA say that their asymmetrical molecules, which were tested in mammalian cells in the study published by Nature Biotech, have fewer unintended effects on non-targeted genes, better silencing efficiency and duration, and will cost less money to make than the longer siRNA molecules.

AiRNA isn’t the first startup to come along with an alternative to siRNA. Dicerna Pharmaceuticals, based in Watertown, MA, believes that its longer molecules of 25-35 base pairs work earlier in the gene-silencing process and for longer durations than other RNAi methods. (Luke wrote about Dicerna’s technology and latest financing earlier this year.)

Still, it’s early days for AiRNA and its aiRNA technology. Li says that the startup operates with a small science team, which he supervises, in a separate lab at the same building as Boston Biomedical’s office. And the company has just begun to raise funds.

Li is no newcomer to the gene-silencing field—or the biotech industry, for that matter. He’s a co-founder and director of Cequent Pharmaceuticals, a Cambridge-based biotech startup developing so-called transkingdom RNAi for gastrointestinal disorders. Cequent’s RNAi technology—discovered by Li and others in his lab at Beth Israel Deaconess Medical Center, Harvard Medical School in Boston—uses modified bacteria to deliver and produce RNAi molecules in cells.

Li is also the scientific founder of ArQule, (NASDAQ:ARQL), a Woburn, MA-based developer of cancer treatments, where he served as chief scientific officer. He led the spin-off of Boston Biomedical from ArQule in January 2007. Boston Biomedical is focused on small molecule drugs to target cancer stem cells.

“I believe that [aiRNA] is actually a big breakthrough in the field,” says Johannes Fruehauf, vice president of research at Cequent. Fruehauf was among the researchers who discovered transkingdom RNAi in Li’s lab a Beth Israel. Fruehauf says that AiRNA’s and Cequent’s technologies are distinct from each other, and there are no plans to combine them.

AiRNA’s initial focus will be to develop RNAi drugs for cancer, inflammation, and infectious diseases, Li says.

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Boston is the biggest center of life sciences in the Xconomy network, and by our analysis, the Bay State’s biotech sector is also the best equipped to survive the economic crisis.

I reached this conclusion by combing through public company filings of more than 70 life sciences companies in Boston, Seattle, and San Diego. For all those companies, I asked the two most important questions about their financial health: How much cash does the company have in the bank, and how fast is it burning through it?

The good news for Boston is that it has a lot of companies with a lot of cash. Of the 40 companies that reported quarterly financial results through the end of September, 15 of them had war chests with more than $100 million. A subset of that group—10 companies—are also quite profitable, including Genzyme, Biogen Idec, and Thermo Fisher Scientific, to name a few. By comparison, San Diego has 10 companies with more than $100 million in reserves, and just three companies that are consistently profitable. Seattle has two companies in the $100 million cash club, and just one profitable operation (Sonosite, the ultrasound device maker).

Of course, there’s plenty of misery and anxiety to go around in Boston, too, as you’ll see below. Here’s a rundown of the 40 companies I analyzed, in alphabetical order. It’s not a comprehensive list, so if you’d like to nominate an operation that was left out, please send us a note at editors@xconomy.com.

—Abiomed (NASDAQ: ABMD). The Danvers, MA-based medical device company had $50.6 million in cash and investments at the end of September and a $6.3 million net loss in the third quarter.

—Alkermes (NASDAQ: ALKS). This Cambridge, MA-based company burned through about $47 million of its cash in the first nine months, but it still had $425.8 million left at the end of September.

—Alnylam Pharmaceuticals (NASDAQ: ALNY). The Cambridge, MA-based developer of RNA interference drugs doesn’t have any products on the market, but it actually has more cash now than it did at the beginning of the year because of partnership deals. Alnylam had $520 million in cash and investments at the end of September, and expects to close the year with more than $500 million. … Next Page »

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First Carl Icahn stirred the Biogen Idec pot again, to nobody’s surprise, then Takeda swept one of the area’s mainstay companies off its feet—to everybody’s surprise. It’s been an exciting week for Boston-area biotech.

—Icahn rang the bell on yet another round in his battle to force a sale of Biogen Idec (NASDAQ: BIIB) by filing a lawsuit demanding that the Cambridge, MA, firm hand over all the documents related to last year’s unsuccessful sales attempt.

—Japan’s biggest drug firm, Takeda Pharmaceutical Company, made a surprise $8.8 billion acquisition of a another prominent Cambridge biotech, Millennium Pharmaceuticals (NASDAQ: MLNM). Millennium will operate as a standalone business unit of Takeda.

—-Beverly, MA, drug developer Inotek announced the consolidation of its operations, the resignation of CEO Andrew Salzman, and the termination of a collaboration with Genentech.

—Bob got the inside scoop on the formation of Fate Therapeutics—the much ballyhooed bicoastal stem-cell startup—and let’s just say it was quite a coup for the suits.

—ArQule of Woburn, MA, announced that Bayer veteran Paolo Pucci will be the firm’s new CEO, taking the place of Stephen Hill, who left this month to become CEO of Brussels, Belgium-based Solvay Pharmaceuticals.

—Aileron Therapeutics raised $10 million in a round led by Apple Tree Partners and the Novartis Venture Fund, the Cambridge-based biopharmaceutical company announced.

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Woburn, MA-based ArQule, which is developing several compounds known as kinase inhibitors as potential cancer therapies, said today that Paolo Pucci, a Bayer senior vice president overseeing Bayer-Schering’s global oncology and  therapeutics business, will take over as the company’s new CEO. Pucci succeeds Stephen Hill, a nine-year veteran of the company who announced his approaching departure in January and left ArQule to become president and CEO of Brussels, Belgium-based Solvay Pharmaceuticals on April 1.

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It wasn’t apparent, but when I spoke to him just before Christmas, Stephen A. Hill might have been mentally packing his suitcase. In any event, Woburn, MA-based biotech ArQule (NASDAQ:ARQL) announced today that Hill will soon be leaving his CEO position for an as-yet-undisclosed destination. Hill “can’t reveal where he’s going yet, but it will probably be public within weeks rather than months,” says ArQule spokesperson William B. Boni.

While Hill will remain ArQule’s CEO for an unspecified time, COO Peter S. Lawrence will take operational responsibility for the company and will be among those considered for the CEO post. Lawrence is a former venture capitalist who joined ArQule in April 2006 and was appointed COO last October.

Boni says Hill is leaving ArQule at “as good a time as you could hope for, if you are an early-stage biotech.” The company has $100 million in the bank and this year anticipates important new data on its most advanced candidate drug, ARQ 197, one of the front runners among a keenly anticipated new class of cancer therapies called c-Met inhibitors.

Hill came to ArQule in 1999 from pharma giant F. Hoffman-La Roche, where he was Global Head of Drug Development. When I spoke to Hill last month he didn’t spill the beans about his move but made some interesting observations about the biotech industry.

According to Hill, one of the biggest challenges facing biotech now is that “the balance has tipped dramatically in favor of avoiding safety issues rather than rapidly getting drugs to patients. That increases the riskiness of drug research programs and directly affects biotech’s ability to raise capital.” At the same time, he said, “little companies are always faced with the challenge of feeding the beast—they need revenue and so must improve productivity.”

Safety problems have indeed been bedeviling the pharmaceutical industry lately. ArQule is itself currently living that dilemma: just last month the company announced that it may be facing side-effect problems around one of the new cancer compounds it has been developing with Roche. That collaboration (around a molecular pathway called E2F1) is potentially worth more than $250 million to the little biotech.

Hill has led ArQule for nine years, helping the company transform itself from a specialized chemistry services provider into a pharmaceutical company. ArQule has initiated a nationwide search for his replacement, according to Boni. “We need someone with great business acumen who can lead the company through the development phase to where we have products on the market,” Boni said.

ArQule’s stock closed today down $0.58 (about 10.4 percent), at $5.00.

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